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HARMONIC ELLIOTT WAVE

Wednesday, September 15, 2010

A correction is due but has the Dollar sunk so much there is no way back..?

In terms of EURUSD I was very satisfied with the way things developed yesterday but that final high pushed up higher than I really feel comfortable with within a medium-to-long-term Dollar bullish structure. In many ways the fact that USDJPY bounced from 5 pips above my target and USDCHF 12 pips below my target is in some way encouraging but 4-hour momentum hardly supports a Dollar low at this point. Just looking at my belief that EURUSD could reach new lows below 1.1879 the higher than expected stalling point yesterday, while not 100% ruling it out, lowers the odds by a long way.

My concern is amplified by the fact that my basic multi-year view is for Dollar cycles to exert considerable downside pressure over the coming 2+ years. Therefore, when I see the current weakness it does dangle a carrot in front of my long term bearish nose…

Having said that I do feel there is some evidence that we should see a correction and a modestly firm one at that. We can then observe the key Dollar resistance levels in that correction to judge whether my concern turns into reality… or fades.

There does seem to be a degree of correlation that can be expected vis-à-vis the Euro and Yen as I still see this moving in a sideways consolidation but with the current bias towards the upside. However, there doesn’t seem to be that much more to go and thus the risk is for a reversal lower back into range. I suspect this will come from what may be a deeper correction in EURUSD rather than losses in USDJPY at this point. Thus, do keep this balance in mind. There may also be only a mild pullback, possibly even sideways consolidation in GBPUSD…

AUDUSD was probably the strongest performer and that may well continue. I see much less potential for a correction lower here after yesterday’s continued rampant gains with the outlook apparently quite bullish here also. Keep the upside more in mind here. USDCAD extended losses and there should be a little further to go but this being what I believe to be the penultimate leg in the 6 month consolidation I feel that we should be looking for that final reversal into range before what should be eventual follow-through lower.

Today’s free analysis is for EURUSD and can be found on http://www.fx-forecaster.com/DailyForecast.html along with yesterday’s Trader Package Review & Trade Set up report. (+0 pips)

Good luck.
Ian Copsey

FX-forecaster Trader Package now available at €20.00 pm
For MT4 users

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